Fuel duty cuts to upset govt's tax calculations

Fuel duty cuts to upset govt's tax calculations

The cut in Customs and excise duties to limit the rise in prices of petroleum products will have a major impact on indirect tax collections for 2011-12.

On Friday, the government, while increasing prices of diesel, domestic LPG and kerosene, removed the 5 per cent Customs duty on crude oil, brought down the import duty on petrol and diesel from 7.5 per cent to 2.5 per cent and reduced the excise duty on diesel by Rs 2.60 to Rs 2 per litre.

Petroleum Minister Jaipal Reddy said these measures would cost the government Rs 49,000 crore (Rs 490 billion) in the current financial year.

The figure included a hit of Rs 26,000 crore (Rs 260 billion) from the Customs duty cut and Rs 23,000 crore (Rs 230 billion) from the cut in excise duty on diesel.

Fuel duty cuts to upset govt's tax calculations

This means the loss on the Customs side for the remaining months (around nine) in 2011-12 is likely to be around Rs 19,500 crore (Rs 195 billion). The impact on excise duty collections will be Rs 17,250 crore (Rs 172.5 billion).

After the duty cut, the collection (taking the Budget estimate as the benchmark) is likely to be Rs 132,200 crore (Rs 1,322 billion) (due to the estimated loss of Rs 19,500 crore). This means a fall of 2 per cent from 2010-11.